Obama sends mixed signals to oil, gas industry in his climate address

US President Barack Obama strongly supported continued domestic natural gas development as he outlined measures to combat global climate change. He also suggested the Keystone XL crude oil pipeline’s cross-border permit would not be approved if it appears the project would significantly exacerbate climate pollution.

In a widely anticipated address at Georgetown University, Obama called on the nation to mobilize its ingenuity to meet ambitious new alternative energy use goals and reassert its position as a global business, technology, and environmental leader.

“This does not mean we’re going to stop producing fossil fuels. Our economy wouldn’t run very well if we did. Transitioning to a clean energy economy will take time,” he continued. “What is true is that we can’t just drill our way out of the energy and climate challenge we face. Our energy and climate strategy must be about more than simply producing more oil. It also can’t just be about building one pipeline.”

The president acknowledged controversy surrounds TransCanada Corp.’s proposed Keystone XL pipeline, and said the US Department of State is in the final stages of its evaluation for the project’s cross-border permit.

“But I do want to be clear: Allowing the Keystone pipeline to be built requires a finding that doing so will be in our nation’s interest,” he added. “[It] should not significantly exacerbate the problem of carbon pollution. The net effects of the pipeline’s impact on our climate will be absolutely critical in determining whether this project is allowed to go forward.”

Little effect

In response, TransCanada chief executive Russ Girling said that previous DOS studies have found the decision whether to build Keystone XL would not likely substantially affect the rate of extraction or combustion of Canadian oil sands crude and its global impact. “TransCanada is pleased with the president’s guidance to [DOS], as the almost five-year review of the project has already repeatedly found that these criteria are satisfied,” Girling said.

American Petroleum Institute President Jack N. Gerard and American Fuel & Petrochemical Manufacturers Association President Charles said in separate statements that they hoped Obama recognizes those earlier findings and approves Keystone XL’s cross-border permit application. “If President Obama trusts his own State Department’s analysis, then he will approve the Keystone XL pipeline,” added Karen A. Harbert, president of the US Chamber of Commerce’s Institute for 21st Century Energy.

Obama said that in addition to producing more crude oil domestically, the US should strengthen its position as the world’s top gas producer “because in the medium term at least, it not only can provide safe, cheap power but it also can help reduce our carbon emissions.

“Federally supported technology has helped our businesses drill more effectively and extract more gas,” he said. “Now we’ll keep working with the industry to make drilling safer and cleaner, to make sure we’re not seeing methane emissions, and to put people to work, modernizing our gas infrastructure so we can power more homes and businesses with cleaner energy.

“The bottom line is natural gas is creating jobs,” Obama maintained. “It’s lowering many families’ heat and power bills. And it’s the transition fuel that can power our economy with less carbon pollution even as our businesses work to develop and then deploy more of the technology required in the even cleaner energy economy of the future.”

Recognized benefits

Organizations representing gas producers welcomed his statements. “While many details are yet to come, it’s worth noting that President Obama again recognized the benefits of gas as an American source of energy that is clean, reliable, and affordable,” America’s Natural Gas Alliance Martin J. Durbin said.

The Interstate Natural Gas Association of America recognizes methane is a potent greenhouse gas and supports efforts to learn more about its emissions, INGAA President Donald F. Santa said. “INGAA and its members already are working with the government, non-government organizations, and industry coalitions to identify cost-effective ways to reduce methane and other emissions,” he said.

American Gas Association President Dave McCurdy said Obama could advance US climate goals by supporting more technologies using gas such as natural gas vehicles, micro-grids, distributed generation, and combined heat and power. “These innovations have great potential to reduce emissions in the transportation, building, and manufacturing sectors while providing customers an affordable, resilient energy solution,” he said.

Obama’s support for developing more domestic gas drew fire from Earthworks Executive Director Jennifer Krill, however. “The recent shale gas boom is made possible by hydraulic fracturing,” she said.  At the same time shale gas’ methane leakage problem is increasing climate change, this boom is also depleting the precious water resources that are being made increasingly scarce by climate change.  And communities are paying the price.”

The president delivered his final jab at the oil and gas industry after saying the government needs to provide alternative and renewable energy technologies more financial incentives. “Because billions of your tax dollars continue to subsidize some of the most profitable corporations in the history of the world, my budget once again calls for Congress to end big oil companies’ tax breaks and invest in the clean energy companies that will fuel our future,” he told his Georgetown University audience.

Clear contradiction

That created a clear contradiction to Obama’s strong support for gas, Independent Petroleum Association of America President Barry Russell said. “To be clear, the tax structure that governs independent oil and natural gas producers is not a subsidy or a handout,” he maintained.

“These provisions and deductions – available to nearly every American industry – are what enable continued investment into US production and exploration,” Russell said. “Yet as the administration attempts to take credit for the historic energy output these companies are providing, it simultaneously targets the men and women at the heart of US production.”

"We appreciate the president’s aim of supporting increased production of domestic gas,” National Ocean Industries Association President Randall B. Luthi said. “We take issue, however, with targeting the oil and gas industry for elimination of the same types of tax deductions that have long been used by other industries.”

“Ironically, the president’s proposal ignores his own regulatory contradictions and also makes claims with little basis in fact,” AFPM’s Drevna said. “He claims to have a goal of reducing GHG emissions, but is moving forward with Tier 3 gasoline and other stationary source regulations that will increase such emissions.”

A few hours before Obama spoke, Gerard expressed disappointment to reporters attending API’s Onshore Oil and Gas Drilling Safety Symposium when it was suggested that the president might recommend more taxes on oil companies again. “I would have hoped he’d moved beyond that old, tired idea that’s been rejected so many times,” API’s president said.

Contact Nick Snow at nicks@pennwell.com

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